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« BREAKING - Tim Geithner Tells Bloomberg He Will Not Serve In An Obama Second Term | Main | How Paulson Appointees & Former GS Employees Dan Jester & Ed Liddy Colluded To Destroy AIG And Secure A Secret Bailout For Goldman Sachs »
Wednesday
Jan252012

Who Is Dan Jester And Why Did Tim Geithner Call Him 103 Times During The Financial Meltdown Of 2008?

Tim Geithner, Bob Robert Rubin

Editor's Note:  In light of the Goldman theft detailed yesterday, we are reposting this story as part of our look back at the Goldman AIG taxpayer heist.

--

Geithner smiles but won't talk about mystery man, former Goldman Sachs executive turned lead Treasury AIG negotiator Dan Jester.

The Hank Paulson stories from earlier got me thinking again about Dan Jester.  This piece by William Cohan is a good starting point.  More coming.

 

By Lehman author William D. Cohan

Now that we have pulled back sufficiently far from the near “destruction of the modern financial system” — as the former Treasury Secretary Henry Paulson described the events of 2008 in his new memoir, “On The Brink” — to focus on how to prevent such a calamity from recurring, the time has come to hear from those players in the drama who really know what happened and why.

Until people such as Warren Spector, the former co-president and head of the fixed-income division at Bear Stearns, and Dan Jester, a mysterious former Goldman Sachs banker turned Treasury official — among many others — come forward and share with us the roles they played before, during and after the crisis, there is little hope that the members of Congress working on financial reform legislation will be able to craft a bill that will succeed in its mission, and the longer they will spend dithering with the ill-conceived ideas being pushed by the former Fed Chairman Paul Volcker.

Who the heck is Dan Jester?  And why isn’t he telling us what he did during the A.I.G. bailout and other pivotal moments of the banking crisis?

To date, these elusive but important Wall Street executives have kept an exceedingly low profile, hoping against hope that the whole thing just blows over. We can’t let that happen. There is just too much at stake now, and Wall Street has proved repeatedly over the past 40 years — since the firms went from private partnerships (where partners had their entire net worth on the line) to public companies (where bankers and traders were encouraged to take huge risks with other people’s money) — that it is incapable of regulating itself.

We need to get beyond the amusing political theater of the recent Financial Crisis Inquiry Commission hearings featuring tight-lipped Wall Street chief executives like Lloyd Blankfein of Goldman, John Mack of Morgan Stanley and Jamie Dimon of JPMorgan Chase — and the artfully crafted statements they compiled with the help of $1,000-an-hour Wall Street lawyers. We need to hear the nitty-gritty of what caused the crisis from the people who know why things happened the way they did but haven’t yet been asked to speak up by someone with subpoena power.

For instance, Warren Spector could provide chapter and verse on how Bear Stearns became a powerhouse in securitizing and trading home mortgages, and how the risks the firm took grew as that business became by far the company’s largest and most profitable. He could also shed light on the important role that Goldman Sachs played in the collapse of the two Bear Stearns hedge funds in July 2007 after Goldman’s traders provided Bear’s executives, in April 2007, with new, lower valuations that Goldman had put on the mortgage securities in the hedge funds. One assumes that Spector could tell us what kind of panic ensued inside Bear as a result. These lower marks led the managers to reduce the funds’ Net Asset Value in April 2007, which caused investors to head to the exits.

Spector could also share his ideas on how to re-open the securitization market without repeating past mistakes. This is the kind of valuable information that Jimmy Cayne, the longtime top dog at Bear Stearns (it was he who fired Spector in August 2007), or Alan Schwartz, who was Bear’s chief executive in the final months of the firm’s existence in 2008, simply cannot provide. Why hasn’t Spector been asked to share his knowledge?

As for Jester, he knows plenty, and isn’t talking. As Representative Marcy Kaptur, an Ohio Democrat, pointed out at the Congressional hearing about American International Group on January 27, between Sept. 14, 2008 and Nov. 26, 2008 — the darkest days of the financial crisis — Tim Geithner, then head of the Federal Reserve Bank of New York and now Treasury Secretary, spoke on the phone with Jester 103 times. Paulson — not Ben Bernanke, the Chairman of the Federal Reserve, or Christopher Cox, the Chairman of the Security and Exchange Commission — was the only person to whom Geithner spoke more often.

Who the heck is Dan Jester?  In “On the Brink,” Paulson first identifies him only as a “contractor” to the Treasury Department while Paulson was secretary. Paulson then elaborates that Jester had previously worked for him at Goldman, where he had been a financial-institutions banker and a “key member” of the firm’s risk committee. According to Paulson, the “unflappable and brilliant” Jester retired from Goldman in spring 2005 and moved to Austin, Tex.

Paulson writes that after he became Treasury secretary, he tried to recruit Jester to Washington as an assistant secretary but Jester declined. When Robert Steel, a former Goldman partner and a Paulson confidante, left Treasury to become chief executive of Wachovia in the summer of 2008, Paulson “impressed” on Jester “the nature of our emergency.” Jester changed his mind and came to Washington “even though it meant leaving his family behind for six months.”

During his time at Treasury, Jester seems to have had his finger in every pie: the rescue of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, the A.I.G. calamity, the decisions to bailout Citigroup, G.M. and Chrysler, and the creation of the Troubled Asset Relief Program. For Fannie and Freddie, Paulson credits Jester with the “inspired idea” of creating a “keepwell” agreement that allowed the Treasury to continually provide financing to those companies “no matter how much they lost long into the future.” During that fateful weekend of Sept. 13 and 14 of 2008, Jester tried to negotiate deals for Lehman with both Bank of America and Barclays — to no avail — before the 158-year old securities firm collapsed into bankruptcy.

Jester quickly turned his attention to A.I.G.  He got a call on that Sunday afternoon, from the billionaire private-equity maven J. Christopher Flowers, who had been the head of the financial-institutions group at Goldman when Jester worked there, who said he’d made a bid to acquire A.I.G. to keep it from failing. Paulson’s book makes no mention beyond that of the role Jester played in the bailout of the insurer — including his being moved from the Treasury to A.I.G.’s offices for a period of time. One former A.I.G. executive told me that Jester was calling many of the shots at the insurer between mid-September, when the New York Fed decided to go ahead with the bailout, and the end of October 2008 ,when Jester was replaced at A.I.G. by another Treasury official because, according to The New York Times, of Jester’s “stockholdings in Goldman Sachs.” Goldman ended up with $14 billion in counterparty payments from A.I.G. “He was Paulson’s man,” the former A.I.G. executive told me. “He was the Treasury’s representative, and he was at every meeting” during that mid-September weekend.

At one point, on the following Monday, Sept. 15, as the A.I.G. situation was spiraling out of control, Jester phoned the three major credit-rating agencies and asked them to hold off from downgrading A.I.G. any further, since that additional downgrade would force the insurer to make even more collateral payments on the spot to counterparties, further depleting its dwindling cash. Jester’s efforts weren’t persuasive. “It was pathetic,” the former A.I.G. executive told me. Then, after the Citigroup executive (and former Treasury secretary and Goldman co-senior partner) Robert Rubin called Paulson to say “Citi was not being given clear direction,” Jester was off to help Paulson and Rubin craft the creative solution to “ring-fence” $306 billion of Citigroup’s most-toxic assets before Thanksgiving 2008. This was, of course, just weeks after Jester had helped Paulson design and unroll TARP.

These days, Jester is back in Austin, where he is being careful not to return calls from those seeking answers to legitimate questions about what role he played in what happened.  Perhaps he would return a call from Geithner asking him to appear on Capitol Hill to answer some questions.  After all, he’s answered that call 103 times before.

##

 

 

Other parts of this series:

 

 

 

 

 

Congress Exposes Potential Profiteering in AIG's Deals: Delay Enabled Further Cover-Up (Janet Tavakoli)

 

 

 

 

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Reader Comments (24)

Sep 19, 2010 at 4:20 PM | Registered CommenterDailyBail
Does Goldman Sachs Really Rule the World?

by William D. Cohan

http://www.thedailybeast.com/blogs-and-stories/2008-10-08/does-goldman-sachs-really-rule-the-world/?cid=tag:all1

Cohan discusses Jester among others...
Sep 19, 2010 at 4:21 PM | Registered CommenterDailyBail
Let’s use the FOIA to get the recording of Timmy’s calls.

Is there a picture of Dan Jester? Is he from Harvard? Maybe Liz Warren knows him? Maybe Dan knows what happened to David Kellermann.

Is Dan Jester in the witness protection program?
Sep 19, 2010 at 4:29 PM | Unregistered CommenterZ
Maybe Dan is one of Obama's handlers?
Sep 19, 2010 at 4:29 PM | Unregistered CommenterZ
Dan "Deep Throat" Jester is not the man in that picture DB.
Sep 19, 2010 at 4:32 PM | Unregistered CommenterZ
Dan Jester: Key adviser to Geithner, who played a key role in shaping the takeover of Fannie Mae and Freddie Mac.
Sep 19, 2010 at 4:37 PM | Unregistered CommenterZ
z...no photos available of dan jester...
Sep 19, 2010 at 4:42 PM | Registered CommenterDailyBail
Congress Exposes Potential Profiteering in AIG's Deals: Delay Enabled Further Cover-Up

http://www.huffingtonpost.com/janet-tavakoli/congress-exposes-potentia_b_440361.html

From Janet Tavakoli...
Sep 19, 2010 at 4:50 PM | Registered CommenterDailyBail
Again, Mr. Geithner, and with him Dan Jester.....headliners in the whole scam, and illlegal activities.....why isn't the two of them being prosecuted?

Why did these two "just fall thru the cracks" of being charged for their activities.....Why do the Washington big boys, seem to always be "covered" for their crimes.....and us "little guys" always go to jail for our "piddling illegal activities".....We go to jail, and the Washington insiders.....and government figures just get "sanctioned" or get a "bad mark on their personnel file???" Why is there always a way for the "big boys" to go "scot free" and us "little guys" have to pay the piper???

This whole great American government STINKS! I am moving abroad very soon! I am tired of the stench!!!
Apr 17, 2011 at 5:34 PM | Unregistered CommenterJack F. Sneed
jack...move to southern spain for a few years...granada is one of the greatest cities on earth...
Apr 18, 2011 at 10:53 AM | Registered CommenterDailyBail
Henry Kissinger on Morning Joe 5/25/11 Regarding China.

http://www.msnbc.msn.com/id/3036789/vp/43165924#43165924

Runs 12 minutes. This is a must see.

9:25 is important as he says the leverage we have against China is to inflate our way out of debt.
May 25, 2011 at 10:06 AM | Unregistered Commenterjohn
Jack F. Sneed
Can I hitch a ride?
May 25, 2011 at 12:19 PM | Unregistered CommenterTR
Reposting this story here as it may be relevant to the case.


Lehman Brothers Subpoenas Geithner In JP Morgan Fight

http://stopforeclosurefraud.com/2012/02/17/kaboom-lehman-brothers-subpoenas-treasury-secretary-tim-geithner-in-jp-morgan-fight/

[SNIP]

Lehman Brothers Holdings Inc. (LEHMQ) and its creditors late Thursday said they want to subpoena Treasury Secretary Timothy Geithner to question him under oath over allegations J.P. Morgan Chase & Co. (JPM) illegally siphoned billions of dollars from the collapsing investment bank in the days before it filed for the largest bankruptcy in U.S. history.
Feb 18, 2012 at 1:31 PM | Registered CommenterJohn
Everyone should appreciate this...

http://www.youtube.com/watch?v=Li0no7O9zmE
Feb 20, 2012 at 9:30 AM | Unregistered CommenterS. Gompers
Great vid, Gomp. Who's the actor playing the loan officer? He's one of those guys you see all the time but don't know by name.
Feb 21, 2012 at 11:18 AM | Unregistered CommenterCheyenne
Sad but true Gompers,We're screwed!

This is a long but interesting read, check it out.

http://www.silverbearcafe.com/private/02.12/fight.html
Feb 21, 2012 at 4:09 PM | Unregistered CommenterSagebrush
I'm not sure Cheyenne, but you are right. How did the Premier go?

I'm a long time reader of the Silver Bear John, and lifelong advocate of the local food movement. Usually as close as right out my back door. Being able to take care of yourself in these modern times is considered a dangerous thing....
Feb 22, 2012 at 9:20 AM | Unregistered CommenterS. Gompers
Thought I would place this here on a hunch.


Libor Scandal: As New York Fed Chief, Tim Geithner Had Multiple Meetings With Barclays


http://www.imackgroup.com/mathematics/892234-libor-scandal-as-new-york-fed-chief-tim-geithner-had-multiple-meetings-with-barclays/
Jul 12, 2012 at 5:47 PM | Unregistered Commenterjohn
The other "Mystery Man" of energy.

http://investing.businessweek.com/research/stocks/private/person.asp?personId=21987674&privcapId=22001&previousCapId=11420997&previousTitle=SUNPOWER%20CORP-CLASS%20A


Background
Mr. Patrick Wood, III, Pat is a Principal at Wood3 Resources. Mr. Wood serves as a Strategic Advisor at NGP Energy Capital Management. Previously, Mr. Wood served as an Associate Project Engineer of Atlantic Richfield International (also known as Arco Indonesia) and as an Attorney with the Baker & Botts law firm in Washington, DC. He has been an Independent Energy Developer since July 2005. Mr. Wood also served as Legal Advisor to Federal Energy Regulatory Commissioner Jerry Langdon and as Legal Counsel to Texas Railroad Commissioner Barry Williamson. He serves as Chairman of the North American Advisory Board of E.On Climate & Renewables North America Inc. (formerly known as Airtricity Inc.). He served as Chairman of Federal Energy Regulatory Commission from June 2001 to July 2005 and also served as its Chairman of Advisory Board. Mr. Wood is the longest-serving appointee of George W. Bush, having been named by him to the Public Utility Commission of Texas in February 1995 to June 2001 to reecommunications and power industries, where he served as the Chairman of that Commission until joining the FERC in June 2001. Mr. Wood serves as a Director of TPI Composites, Inc., First Wind Energy Systems and has been a Director of Range Fuels Inc. since June 2008, Quanta Services, Inc. since May 24, 2006, and Sunpower, Inc. since September 2005. He served as the Chairman of the Public Utility Commission of Texas from 1995 to 2001. Mr. Woods holds a J.D. degree from Harvard Law School and B.S. in Civil Engineering from Texas A&M University.
Dec 23, 2012 at 10:56 AM | Unregistered Commenterjohn
Hi,

We know that Jester Masks is essential media for the entertainment of the mask lover people.so if you want the Jester Masks
for you please visit here.here are the Jester Masks in the world and this Jester Masks are looking very nice.

Thank you
Jul 14, 2013 at 1:53 AM | Unregistered CommenterJester Masks
Geithner To Advise Obama On Next Fed Chairman

http://www.zerohedge.com/news/2013-08-02/geithner-advise-obama-next-fed-chairman

[snip]

While assuring the world that he will not give advantage to Larry Summers, we wonder if the meeting with the President will sound a little like this?

-----------
Just a note to the readers, when I post a comment, you should re-read the headline story and review the previous comments. Lots of stuff there too. Thanks.
Aug 3, 2013 at 12:50 PM | Unregistered Commenterjohn

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